This past Thursday, the Senate Retirement and Insurance Committee met to take action on House Bill 2304, which would provide a two percent cost of living adjustment (COLA) for state pension retirees, pending the outcome of an actuarial analysis of the pension system. The recommendation to complete the analysis came out of recent discussions by members of the pension reform working group requested by Senate President Pro Tem Greg Treat.
Because the bill is a fiscal retirement bill, there are several provisions that must be followed according to the Oklahoma Pension Legislation Actuarial Analysis Act (OPLAAA) before being passed into law. The analysis must include an examination of the unfunded actuarial accrued liability resulting from the bill, as well as the dollar amount of the annual normal cost which will result from the bill. The dollar amount of the increase in the annual employer certification must also be considered.
The bill will remain with the Retirement and Insurance Committee while the actuarial analysis is completed. We expect the report to be completed near the end of the year, and after the findings are released, the bill will be eligible for consideration again by the same committee next session. If it passes out of committee, it would then be eligible to be heard by the full Senate next spring.
The COLA bill has received a lot of attention from both supporters and critics, but it’s important to recognize that we can’t keep borrowing from the fund and still maintain a well-funded system. It could similarly be compared to if we continued to borrow against our home’s value after building up equity. If we did that, our home would never be paid off. Likewise, if we continue to borrow against the retirement system, we will never have a fully funded pension system.
Decades of mismanagement left billions of dollars in unfunded liabilities, jeopardizing the state pension system and hiking up the borrowing costs for government entities due to lower bond ratings. Over the last decade, Republicans have ensured approximately $400M has been invested into retirement funds annually and dedicated revenue from taxes has been prioritized into retirement funds. We’ve also been able to eliminate the usage of retirement funds to cover unrelated expenses.
It’s important to continue to be vigilant with that funding. In 2009, the state pension fund was funded at around 67.5%. Today, it’s funded at just over 91%. Given that Oklahoma had one of the worst funded pension programs in the nation just ten years ago, this is real progress.
We will wait and see what the actuarial analysis concludes later this year, but requesting the report is a prudent and essential step in giving us a better informed picture when considering HB 2304. We acknowledge that many retirees have gone without a COLA for many years, but at the same time, we also don’t want to over-obligate the citizens of the state who work outside of state government. In the meantime, while we are awaiting the actuarial analysis, lawmakers also intend to form an interim study in the coming months to do a deeper dive into the state pension system and discuss other areas where we can make a difference in the system without harming the funded liability.
If you have any questions about state government or concerns about legislation, please do not hesitate to contact my Senate office at the Capitol by calling 405-521-5555 or writing to me at Senator Marty Quinn, 2300 North Lincoln Blvd. Rm. 419, State Capitol Building, Oklahoma City, OK 73105. I can also be reached via email at firstname.lastname@example.org